Non-healing skeletal defects are addressed in over 2.2 million surgical cases each year. Bone morphogenetic protein 2 (BMP2), the main growth factor for bone regeneration, has significant adverse effects at the FDA approved dose for human use. These effects include life-threatening cervical swelling and promotion of adipogenesis or cyst-like bone voids from dose-dependent peroxisome proliferator-activated receptor ? (PPAR ?) upregulation. Thus, a critical barrier to progress in improving the safety and efficacy of BMP2 is development of molecular signaling strategies that effectively target osteogenesis induction and adipogenesis suppression to optimize bone formation. The current New Investigator resubmission addresses this barrier using NELL-1 (Nel-like molecule, type I). NELL-1 is a secreted factor that induces significant in vivo bone formation in multiple small and large animal models. NELL-1 represses BMP2-induced adipogenesis and augments BMP2-induced osteogenesis. Moreover, our new data indicate that NELL-1 activates Wnt/?-catenin signaling and suppresses PPAR ? signaling. This has led to our central hypothesis that NELL-1 improves the efficacy of BMP2-induced bone formation through: [1] activation of Wnt/ ? -catenin signaling, and [2] suppression of PPAR ? signaling, tested in four specific aims. In AIM 1, we will determine the involvement of Wnt/ ? -catenin and PPAR ? signaling in NELL-1+BMP2 mediated bone repair. Using our published rodent femoral segmental defect (FSD) model, we will precisely evaluate Wnt and PPAR ? signaling in TOPgal Wnt reporter mice. Next in AIM 2, we will evaluate the necessity of Wnt/ ? -catenin signaling in NELL-1+BMP2 regulated bone healing. Here, we will induce Wnt/ ? -catenin 'loss of function' by biochemical (Wnt inhibitor) or RNAi (? -catenin shRNA) methods in our FSD model. In AIM 3, we will determine if increased Wnt/ ? -catenin signaling is sufficient to reproduce NELL-1's effects on promoting BMP2-induced osteogenesis and inhibiting BMP2-induced adipogenesis. Here, we will induce Wnt/ ? -catenin gain of function by genetic means using Axin2-/- (null mice) and examine its effects in our FSD model. Finally in AIM 4, we will determine if decreased PPAR ? signaling can reproduce NELL-1's effects on promoting BMP2-induced osteogenesis and inhibiting BMP2-induced adipogenesis. PPAR ? loss of function will be induced using PPAR ? +/- mice and RNAi (PPAR ? shRNA) methods in our FSD model. Successful completion of the AIMS will improve efficacy and reduce adverse effects for BMP2 based skeletal regeneration based on the combination therapeutic NELL-1+BMP2. Moreover, increased induction of osteogenesis and suppression of adipogenesis among mesenchymal stem cells will lead to marked improvements in clinical bone repair.